The current LCR standard within the REC weighting system is very complex in its calculation method and sets a level that can be sufficiently achieved with already economically viable components as the standard for awarding benefits, which does not provide sufficient incentives for the development and commercialization of technologies consistent with the offshore wind technology development goals and strategies set in the 2030 Roadmap for Carbon Neutral Energy Technology. We also found that in the case of competitive bidding for wind power fixed-price contracts, large points are awarded for the "industrial and economic effects" category, but no clear criteria are provided, effectively neglecting the category that can significantly induce investment in the domestic supply chain if carefully designed. This issue brief proposes alternatives to address these issues and suggests that practical efforts should be made to reduce administrative costs, such as licensing procedures, by passing relevant legislation as soon as possible so that companies can increase production, develop technologies, and commercialize them.
HIGHLIGHTS
• The current Local Content Requirement (LCR) scheme for offshore wind exists within the REC weighting and tendering auction systems for wind fixed-price contracts.
• The LCR scheme under the REC weighting system is complicated but ineffective in incentivizing core technology development and investment, and the LCR scheme under the tendering auction system for wind power fixed price contracts has no specific criteria.
• The current system needs to be refined to incentivize development and investment in core offshore wind technologies, including increasing the threshold for awarding additional LCR-related RECs, adjusting the threshold for each component of the LCR calculation, and quantifying the domestic economic and supply chain contribution effects of tendering auction for wind fixed-price contracts based on the LCR ratio or fundraising contribution.
• Increasing the share of offshore wind in national renewable energy targets and addressing permitting and community acceptance issues should be done simultaneously to ensure that the LCR scheme is a step forward in the offshore wind supply chain.